function VAR0(H_t,Se,Phi1,y,n_agg)

(T,n) = size(y)
s     = zeros(T,n);

# Initialization
s[1,:]   = y[1,:];

# VAR Recursion
sprime   = zeros(n,1);
liki     = zeros(T,1);

# Forward Iterations
for t=2:T

    # prediction step
    sprime = Phi1*s[t-1,:];

    # prediction step
    yprediction = sprime;
    v = y[t,:] - yprediction;
    F = Se;
    liki[t]    = -0.5*n*log(2*pi) - 0.5*log(det(F)) - 0.5*v'*inv(F)*v;

    # updating step
    s[t,:]   = sprime;

end

return s, liki

end
